Growth prospects are moderately positive in the face of global contexts and international macroeconomic frameworks that remain uncertain and influenced by various factors. In other words, Italy is growing, even more than the European average, but there are critical issues to be tackled and solved. In a nutshell, these are some of the messages that emerge from reading the 2024 Annual Report of the National Institute of Statistics (Istat), which providesss a picture of the Italian situation.
Presented on 15 May last at Palazzo Montecitorio by ISTAT President Francesco Maria Chelli, the report is divided into four chapters. The first one reconstructs the current complex economic picture and the second analyses the structural changes in employment. The third chapter delves into the evolution of the economic conditions of families and the quality of people’s lives; the fourth provides a territorial perspective to the analyses made in the previous chapters.
Over the last three years, after the decline linked to the pandemic, Italy has returned to grow at a rate higher than the EU average and, among the major economies, faster than France and Germany. According to the Report, the trends and dynamics of the Gross Domestic Product (GDP) were sustained mainly by domestic demand, with investment playing an important role, and a significant contribution provided by those in the construction sector. 2023 was characterised by a marked slowdown in activity in the advanced economies as a whole, and a stagnation in the volume of international trade. The performance of the major European economies was uneven: GDP increased by 2.5% in Spain, by 0.9 in Italy (from 4 per cent in the previous year) and by 0.7 in France, while in Germany it decreased by 0.35%. The slowdown of growth in Italy was affected by the weakening of household consumption demand. After two years of strong growth, investment slowed down, but remained positive in all components. The trade balance, which in 2022 had recorded a deficit higher than EUR 30 billion due to soaring energy prices, recorded again a surplus of EUR 34.5 billion in 2023, thanks to improved terms of trade, a sharp reduction in imports and substantial stability in the value of exports. Preliminary estimates for the first quarter of 2024 indicate moderate economic growth in Italy (+0.3%), France and Germany (+0.2 in both cases), and more robust growth in Spain (+0.7%). If these estimates were confirmed – as underlined in the Report – Italy’s growth in 2024 would be 0.7%.
Going into detail, in Italy the cyclical variation is the result of an increase in added value in all sectors: on the demand side, there is a negative contribution from the domestic component (before inventories) and a positive contribution from the net foreign component. In more recent years, economic growth has been accompanied by the good performance of the labour market: in 2023 the number of employed people continued to increase at a slightly lower rate than in the previous year (+2.15, from +2.4), despite the slowdown in economic activity. The first data and figures for 2024 confirm this favourable trend. In line with the previous year, the increase in employment over the past year was mainly attributable to the permanent and open-ended contract component. The public finance framework continued to improve over the past year, with a reduction in the net borrowing ratio (from 8.6 to 7.4 % of GDP) and debt (from 140.5 to 137.3 %). In the second half of 2021, like other advanced countries, Italy was confronted with a rise in prices caused by imported commodities, followed at the end of 2022 by a rapid decline, which strengthened in 2023. Both of these trends and dynamics were relatively more marked in Italy, where the EU countries’ Harmonised Index of Consumer Prices (HICP) had reached a 12.6% trend variation in October 2022, the highest among the EU’s major economies. By comparison, in Germany the variation was 11.6 per cent, in France 7.1, while in Spain the peak, namely 10.7 per cent, was reached in July of that year. On the other hand, according to preliminary estimates, in April 2024 the trend variation in Italy was only 1.1 per cent, compared to 2.4 in France and Germany, and 3.4 in Spain. The inflationary phenomenon, which was extraordinary in its magnitude, had different effects at sector level on companies’ profit margins.
Overall, over the last two years, households have maintained consumption levels by reducing their propensity to save, which had almost doubled in 2020. Since the end of 2023, however, we have recorded the first signs of recovery in contractual wages, which are growing faster than inflation. While in recent years, during the various shocks that have followed one another, the Italian economy has been able to react – also thanks to government measures to support incomes and economic activity during the pandemic and the energy crisis – the country’s growth prospects remain affected by problematic factors that have deep roots, for which – as ISTAT emphasised – “much can still be done and, in part, is being done”. Italy’s relatively good economic performance in recent years follows two decades characterised by a prolonged crisis, in which economic activity and labour productivity grew at a much slower pace than in the past and in other major European economies, also leading to very modest real wage growth. During this period, the structure of the Italian economy has gradually adapted to changes in the competitive environment and, more recently, to the impact of the digital transition. Although problematic issues and delays remain in the use of more complex technologies – such as artificial intelligence – and in the spreading of digital skills, the Report underlines that the production system and the Public Administration have shown significant progress in the adoption and use of information and communication technologies (ICT). The digitalisation of the economic system, fostered by the incentive policies implemented in recent years and accelerated by the need for temporary reorganisation of work activities as a result of the pandemic, can be further strengthened by the investment envisaged by the National Recovery and Resilience Plan (NRRP). According to the ISTAT Report, further potential can be released with the adoption of more complex technologies by small and medium-sized enterprises, with training in ICT professions, and the ability of the economic system to use this type of resources to improve efficiency and productivity.
Over the past twenty years, Italy has defended its position in international goods markets against a backdrop of growing competition from emerging economies, managing to face the effects of the loss of export weight of many supply chains through the evolution of trade specialisation. As maintained in the ISTAT Report, the same path should be followed by services, thus creating greater added value in the strongly specialised market niches. This is an area in which small and medium-sized enterprises, the backbone of the Italian economy, can contribute to enhancing investment and contributions linked to the NRRP.
